More Money May Mean Less In Value Of Money And Spending Power What Remittances to the Caribbean Can Buy In 2008 And Next Year? IDB Expects Sharp Decreases In Value Of Money To The Region

By Tony Best

It’s a case of more foreign money buying less domestically.

That’s a key chapter in the remittance story which is being written these days in the Caribbean, whether in Jamaica, Haiti, Guyana, Trinidad and Tobago, Barbados, the Bahamas, Grenada, Antigua or Belize.

And with no early economic turn-around in sight in North America the painful financial picture should continue to be painted well into 2009 as skyrocketing food and energy prices take a bigger bite out of the almost $5 billion which immigrants from Caricom states are expected to send back and the $8 billion usually remitted to the entire English, French, Spanish and Dutch-speaking region in 2008.

At a time when remittances to Caricom countries and their Latin American neighbors, including the Dominican Republic are expected to rise by less than 2 percent this year, the money repatriated to families from their relatives in North America is buying less and less than the year before.

That harsh reality was traced by the Inter-American Development Bank’s Multilateral Investment Bank, MIF, to a mix of the economic slowdown in North America, rising inflation in the Caribbean, and growing fears about the ability of the United States and Canada to withstand the turbulence in the financial markets.

Adjusted for inflation, this year’s total will be worth 1.7% less than the amount sent back in 2007, marking the first decrease in the value of remittances to Latin America and the Caribbean since the MIF started tracking these flows in the year 2000., stated the bank in Washington. Until last year, remittances to the region had grown by double digits every year.

The MIF expects immigrants to send some $67.5 billion in remittances to families in the Caribbean and Latin America in 2008 as compared with $66.5 billion in 2007, a less than two per cent increase.

But with inflation running at double digits in many Caribbean nations and slightly less in others, in Jamaica its was about 13 per cent point to point between August 2007 and this year, and about nine percent in Barbados, for example, the real value of remittances is less, despite the fact that the dollar amounts may be slightly higher than the year before.

It is clear that remittance flows will change in concert with global economic reality, warned the IDB. It is important to keep the decrease in the impact of remittances in perspective. Any decline is likely to be modest, because migrant workers have proven their ability to adapt to changing demands for their labor.

Focus groups held earlier this year illustrate that Latin American and Caribbean immigrants are cutting back on their own consumption, moving between job sectors and even moving from one state to another in order to be able to continue sending money home.Remittances to the Caribbean rose by 7 percent in 2007 over the amount for 2006 but as the economic troubles in the U.S. hit home in cities across the country, the amounts are said to be rising by less in 2008, the second year in a row for which there wasn’t a double digit increase.

That fact is significant to national economies and to individuals because of remittances vital role.

Jamaicans remitted $1.9 billion in 2007, accounting for 18 per cent of the country’s gross domestic product while Haitians sent $1.8 billion or 35 percent of the GDP. The funds sent back to Guyana amounted to $424 million or 43 percent of the economy. Trinidadians repatriated $123 million to their homeland last year but that represented a mere one per cent of the economy. The World Bank estimated that Barbadians abroad had remitted more than $140 million or 7 per cent.

On a per capita basis, according to the World Bank, Jamaica is the country with the highest level of remittances with about $700 for every man, woman and child, followed by Barbados at $519 and El Salvador with flows of approximately $400. When World Bank experts calculated the amounts for 10 countries ----Jamaica, Haiti, Trinidad and Tobago, Antigua &Barbuda, Guatemala, Mexico, El Salvador, Barbados and the Dominican Republic the per capita average was $320.

In its recent analysis of the flow of funds, MIF stated that despite the slowdown, the volume of remittances to the Caribbean and Latin America still outstrips all the overseas development aid and foreign direct investment to the region.

Just as important, added the Fund, remittances will continue to be a vital lifeline for millions of households.

Interestingly, the IDB expects West Indians to adapt to the declining economic conditions in the U.S. so they can continue to send funds to relatives, thus ensuring that remittances remain a stable source of financial support.

People who are already abroad will adapt, looking for new jobs or cutting back on their consumption in order to keep sending money home, said Luis Alberto Moreno, IDB President. Those thinking of migrating will probably opt for destinations where the economy is stronger and more money available.

 In the case of Caricom member-states, Robert Meins, a MIF remittance specialist, told the New York Carib News in May this year that the key factor affecting remittances to the region would be the decline in the U.S. economy.

A few months ago increases in remittances were running at above 9 per cent, year on year, which was substantial, he said.

But with escalating food and energy prices fueling significant jumps in the cost of living, the flow of money would still result in the remittances valuing at less than a year ago.

However, all indications are that Jamaicans, Guyanese, Trinidadians, Belizeans and others from Caricom are faring better than Hispanics and the major reason is language skill.

The discrimination factor is much lower on immigrants from the Caribbean, Meins said. The (Caribbean) community is much older and has less language problems than those Latin immigrants.

 

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